Northland Regional Council v Philbrick [2018] NZHC 433 (6 March 2018)

Last Updated: 5 April 2018

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY I TE KŌTI MATUA O AOTEAROA WHANGĀREI TERENGA PARĀOA ROHE

CIV-2017-488-103 [2018] NZHC 433

UNDER	the Insolvency Act 2006
IN THE MATTER OF	the bankruptcy of BERNARD PHILBRICK
BETWEEN	NORTHLAND REGIONAL COUNCIL Judgment Creditor
AND	BERNARD PHILBRICK Judgment Debtor

Hearing:	6 March 2018
Appearances:	N Hartwell for the Judgment Creditor Judgment Debtor is self-represented (accompanied by a McKenzie Friend – Mr Pawley)
Judgment:	6 March 2018

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Webb Ross McNab Kilpatrick (N Hartwell), Whangarei, for Judgment Creditor

Copy for:

Bernard Philbrick

NORTHLAND REGIONAL COUNCIL v PHILBRICK [2018] NZHC 433 [6 March 2018]

[1] Mr Philbrick has applied to set aside the Northland Regional Council’s bankruptcy notice issued on 14 September 2017. The debt the subject of the notice is an order for costs made in the Environment Court on 5 September 2015.¹ The amount of the order for costs is $17,336.73.

Background

[2] The Northland Regional Council applied to the Environment Court for an enforcement order under the Resource Management Act 1991 against Mr Philbrick. There was 2-day hearing on 20–21 April 2015. The court gave its decision on 22 June 2015.² The court made an order under s 314(1)(a)(i) of the Resource Management Act that Mr Philbrick cease, and refrain from commencing, anchoring of a vessel, the Rose Maree, in a manner that contravenes r 31.4.9(a) of the Regional Coastal Plan for Northland and s 12(2)(a) of the Resource Management Act. He was prohibited from doing so within the Whangarei estuary, as shown on Attachment A to the decision. The court reserved costs.

[3] The parties made submissions on costs. The Principal Environment Court Judge decided costs on the papers, after receiving written submissions from the parties. It is apparent from paragraph [6] of the costs decision that Mr Philbrick did make submissions as to costs, and he acknowledges that he did so. The Judge gave reasons for his decision. The costs he awarded were less than what the council was seeking, but more than what Mr Philbrick considered he should pay.

[4] A bankruptcy notice issued under s 17 of the Insolvency Act 2006 is a step that may later lead to a creditor applying for a debtor to be made bankrupt. A bankruptcy notice is founded on a court judgment or order requiring a definite sum to be paid. After the notice is served on the debtor, the debtor has a period in which to comply with the notice. If the debtor does not comply with the notice, that is an act of bankruptcy under s 17 of the Insolvency Act and may be the basis for a later bankruptcy application.

¹ Northland Regional Council v Philbrick [2015] NZEnvC 157.

² Northland Regional Council v Philbrick [2015] NZEnvC 111.

[5] In applying to have the bankruptcy notice set aside, Mr Philbrick is asking the court not to allow the bankruptcy notice served on him to be the basis for any act of bankruptcy. Under r 24.10 of the High Court Rules, from the time that Mr Philbrick filed his application to set aside the bankruptcy notice, the time for complying with the notice has been extended. The extension runs until the court decides whether the bankruptcy notice should stand or not.

Mr Philbrick’s application

[6] The Regional Council has taken objection to the form of Mr Philbrick’s documents. It says that his documents are deficient because they do not state the relief sought, the grounds justifying the relief, and they do not refer to particular legislation, rules of law or any judicial decisions on which Mr Philbrick relies. It refers to r 7.19(1) of the High Court Rules 2016, which says that these are required for an interlocutory application. Mr Philbrick is not a lawyer and it would be expecting too much to require him to complete the documents in the way that an experienced lawyer would. The document he filed is said to be a counterclaim. He has sought in his counterclaim the setting aside of the bankruptcy notice and the nullification of the Environment Court costs order. He has also sought payment of $20,000. That document called a “statement of counterclaim” is in numbered paragraphs. It sets out the matters on which Mr Philbrick relies for his application. While not in the form of a notice of application which is conventionally used under r 7.19, it is adequate to tell the Regional Council what relief Mr Philbrick is seeking, and his grounds for doing so. In a minute dated 27 November 2017, I recorded that while Mr Philbrick’s documents are irregular, I treated them as an application to set aside the bankruptcy notice. I stand by that ruling.

[7] I also recorded in my minute that he had filed and served his application within time. In his documents, he stated that the Council’s bankruptcy notice had come to his attention on 14 October 2017. He filed his documents on 26 October—that was within the 10 working days required under s 17 of the Insolvency Act.

Service of bankruptcy notice

[8] There is a question as to service of the bankruptcy notice on Mr Philbrick. Mr Philbrick says that the notice was not served on him personally but only came to his knowledge later. That is confirmed by an affidavit by Mr Watters given for the Northland Regional Council. That affidavit shows that on 11 October 2017 a lawyer for the Northland Regional Council went on board the yacht Rose Maree. The lawyer asked for Mr Philbrick. An elderly man appeared. He informed the lawyer that Mr Philbrick was not on board. The lawyer left the bankruptcy notice on the vessel. I am satisfied that the elderly man who was on the vessel is not Mr Philbrick. Mr Philbrick tells me that the elderly man was his father. I accept Mr Philbrick’s advice that he did not find out about the bankruptcy notice until 14 October 2017.

[9] As I have already stated, Mr Philbrick filed his documents in court within 10 working days of those documents coming to his knowledge. That has enabled him to start his application to set aside the bankruptcy notice and to present to the court all matters he wishes the court to consider on his application. The date of service is 14 October when he received the documents, not any earlier date. He has not been prejudiced by the lawyer not giving the documents to him personally, but only receiving them later.

[10] The Regional Council cites Bond Cargo v Chilcott as authority that service takes place only when the document comes to the knowledge of the person to be served.³ I follow that. If there has been any irregularity, this is an appropriate case for a waiver under s 418 of the Insolvency Act. That is because Mr Philbrick has not been prejudiced by any irregularity in service. In that, I am following the decision of the Court of Appeal in Best v Watson.⁴

The substantive issues

[11] Mr Philbrick contests the validity of the Environment Court’s decision to make enforcement orders against him. His argument is that he has rights of public

³ Bond Cargo Ltd v Chilcott (1999) 13 PRNZ 629.

⁴ Best v Watson [1979] 2 NZLR 492.

navigation, which are recognised under the Marine and Coastal Area (Takutai Moana) Act 2011. Those rights of public navigation are not just founded in statute but under earlier law as well, and those rights of navigation extend to rights of temporary anchorage. He contends that he was doing no more than anchoring his vessel temporarily in the Whangarei Harbour and the Environment Court lacked any jurisdiction under which it could interfere with those rights. He accordingly argues that the Environment Court decision was void and, because it was void, the enforcement order is unenforceable. Therefore, the later costs order must also fall by the wayside.

[12] In its decision making the enforcement orders, the Environment Court took care to spell out the law.⁵ Importantly, the court referred to s 27 of the Marine and Coastal Area (Takutai Moana) Act 2011, including subs (3), which states that the rights of navigation set out in subs (1), including the right of temporary anchorage, may be exercised subject to authorised restrictions and prohibitions imposed by any enactment. Under subs (5), an “enactment” is defined to include regional plans. The court also stated the relevant provisions of the Resource Management Act: s 12(2)(a), which governs access to the common marine and coastal area, and the definitions of “occupying” and the “coastal marine and coastal area” in s 2. Under s 12 (2)(a), occupation of the common marine and coastal area is prohibited unless expressly allowed by, amongst other things, a rule in a regional coastal plan. The court referred to the relevant provisions of the Northland Regional Coastal Plan, including r 31.4.9(a) under which anchorage of recreational or commercial vessels is a permitted activity, provided certain standards and terms are met. The vessel must be anchored so that it does not interfere with the safe navigation of other vessels and must not remain at anchor for more than 14 consecutive days in the same embayment, inlet or estuary.

[13] The case then turned to a factual enquiry as to whether Mr Philbrick had complied with the rule. The court’s decision is very much on the evidence that it heard. Mr Philbrick says that the court had no right to enter into that enquiry at all, and that somehow his rights of navigation, for which he relies on the Marine and

⁵ Northland Regional Council v Philbrick [2015] NZEnvC 111 at [9]–[22].

Coastal (Takutai Moana) Act 2011, trump everything, including the Regional Coastal Plan and the rules under which mooring and anchorage are regulated.

[14] I now move to how the court should deal with Mr Philbrick’s argument in the context of an application to set aside a bankruptcy notice. It is important to recognise that when a court hears an application to set aside a bankruptcy notice, it has limited powers. It does not act as an appellate court to decide whether the original court, in which the money order was made, acted correctly or not. The court does have the power, in some circumstances, to set aside a bankruptcy notice in its inherent jurisdiction. It may do so to prevent an abuse of process. An important decision in this area of the law is Master Kennedy-Grant’s judgment in Re Wise.⁶ A typical case for the court to exercise its inherent jurisdiction to set aside to prevent an abuse of process is where a creditor has obtained a judgment by default or the debtor has obtained judgment by some procedural irregularity, and the debtor wishes to have the judgment set aside on the grounds of a possible miscarriage of justice. The practice of this court sitting in its bankruptcy jurisdiction in those cases is to hold the setting- aside application over while the debtor is given the opportunity to go to the other court and apply there to have the original judgment set aside. If the other court upholds the judgment, the application to set aside the bankruptcy notice will fail. On the other hand, if the debtor is successful in having that money judgment set aside, then this court will likewise set aside the bankruptcy notice. That means that the debtor can have a re-hearing in the original court and have the merits of the case determined afresh. There may be wider grounds than those I have just described for setting aside a bankruptcy notice in the court’s inherent jurisdiction. For example, if the debtor has already paid the debt then this court would have little trouble in recognising that the bankruptcy notice is an abuse of process.

[15] In this case, Mr Philbrick took an active part in the proceeding in which the Environment Court made the enforcement order, and when it ordered Mr Philbrick to pay costs. Under the Resource Management Act, a party has a right of appeal to this court from a decision of the Environment Court on a question of law.⁷ Mr Philbrick did not exercise any right of appeal. He has not made any application to the

⁶ Re Wise HC Auckland B227-228/95, 21 June 1995.

⁷ Recourse Management Act 1991, s 299.

Environment Court for a re-hearing. He has had some two years or more in which to challenge the Environment Court decision if he considered that it could be successfully challenged. He took no steps until he was served with the bankruptcy notice. I do not regard it as arguable that Mr Philbrick has any reasonable case for challenging the legal basis for the Environment Court’s decision. The Environment Court has jurisdiction to make enforcement orders and the Environment Court appears to have followed clearly established law in considering whether Mr Philbrick was in breach of s 12(2)(a) of the Resource Management Act in anchoring his vessel. There was clear power to determine those matters. The case became a contest whether the rules applied on the facts of the case. That factual enquiry is not something that could be reviewed here, and does not give any ground for Mr Philbrick to contend that the decision of the Environment Court was void, as opposed to being wrong on the facts. In short, I see no basis on which this court should interfere with the order for costs made after the enforcement order, because I see no reasonable basis on which Mr Philbrick could now challenge the original enforcement order made by the Environment Court.

[16] There is one other aspect to Mr Philbrick’s application. He has stated that he has a claim for damages against the Northland Regional Council for $20,000. He says that is a claim for time lost, distress and anxiety for defending his rights and reputation. In asserting a counterclaim, he is relying on s 17(7) of the Insolvency Act. I accept that he could not have made a claim for damages in the Environment Court proceeding where the Regional Council sought an enforcement order against him. In asserting a claim for damages, he is making a claim at common law. The Environment Court has no jurisdiction to decide common law claims for damages. The counterclaim asserted now was outside the Environment Court’s jurisdiction. I am not satisfied, however, that he has any arguable claim against the Regional Council that could give him a claim for damages at common law. It is necessary for him to show some arguable cause of action. The only one that comes to mind is a claim for malicious prosecution. It is possible to make a claim for malicious prosecution for a civil proceeding as well as a criminal proceeding. I take it that a proceeding seeking an enforcement order under the Resource Management Act could also be the basis for a claim for malicious prosecution. But in any such claim the person seeking damages must show that they succeeded in the original proceeding. Mr Philbrick was unsuccessful on the
application brought by the Northland Regional Council. There is therefore no basis on which he could make a claim for malicious prosecution. I cannot conceive of any other arguable cause of action that he could maintain against the Regional Council. Accordingly, I see no basis for his claim for damages.

Outcome

[17] In summary, this court cannot set aside the Environment Court’s decision on an application to set aside a bankruptcy notice and there is no basis on which the court should adjourn this matter to await the outcome of any other proceeding to have the Environment Court’s decision set aside. There is no arguable basis for doing so. I cannot see any basis for an arguable cross-claim or counterclaim under s 17(7) of the Insolvency Act. That means that I must decline the application to set aside the bankruptcy notice.

Costs

[18] The Regional Council filed a memorandum as to the costs it was seeking. Counsel seeks a total of $8,472.50, inclusive of disbursements, for opposing the application to set aside the bankruptcy notice. It has claimed for 1½ days for filing written submissions. The Council was directed to file its written submissions by early February 2018. It did not file its submission until two days ago. That was late. There was no proper explanation for the late filing of the submissions. It is important that directions for filing submissions be complied with, and that particularly applies in this case given that Mr Philbrick is self-represented and cannot be expected to respond promptly in the same way that a lawyer could. There should be a deduction from the costs because of the Council’s non-compliance with that direction. The submissions are only likely to have required half a day so I allow half a day rather than 1½ days, and I deduct that by a half because of the delay in filing those submissions. I make that deduction under r 14.7 of the High Court Rules. Mr Philbrick is to pay costs to the Regional Council, in accordance with the memoranda as to costs, but subject to the adjustment that I have recorded in this decision.
[19] The time for complying with the bankruptcy notice has now expired. That is the effect of r 24.10 of the High Court Rules.

[20] In case Mr Philbrick wants to take the matter any further, there have been changes in the laws relating to the way that debtors can challenge decisions on applications to set aside bankruptcy notices. For clarification, I ruled in Prescott v Police that the correct remedy under the current law is to appeal to the Court of Appeal.⁸ The normal rules for appealing to the Court of Appeal apply.



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Associate Judge R M Bell

⁸ Prescott v Police [2017] NZHC 2701 at [6]–[9].